Amy Booth 
Argentina’s National Securities Commission (Comisión Nacional de Valores) has introduced a measure preventing market participants from using dollars obtained through MEP or CCL operations to buy bonds for 15 days.
Interpreted as a tightening of currency controls, the measures seek to put a stop to certain kinds of arbitrage deals that involve trading sovereign bonds and bills back and forth between the dollar and the peso. The new restrictions were published in the official bulletin today.
Today’s Resolution 962/2023 states that market participants who buy dollars through MEP and CCL operations cannot use them to buy other sovereign bonds or bills for 15 days.
“[The resolution] doesn’t change anything in the day-to-day operations of 99% of those who do MEP and CCL,” CNV President Sebastián Negri tweeted on Tuesday night. “What it does […] is avoid arbitrages from price differences between public titles and other instruments, as we have been warning over the past few days, distorting the market.”
The measure comes after it emerged last week that market participants were performing an arbitrage deal in which they bought bonds such as the AL30 in pesos, sold them for dollars, and either bought a LEDE bond in dollars, selling it back into pesos at a higher rate, or simply sold the dollars in the informal market for the “blue dollar” exchange rates.
The arbitrage was possible because the government had been intervening in the AL30 market. Last Friday, the Central Bank did not intervene in the AL30 market, prompting a 7% jump in the MEP dollar. Central Bank sources told the Herald this was a move to close the exchange gap that made these deals possible.
Since Argentina limits access to dollars, Argentine sovereign bonds are used to access the U.S. dollar. The blue-chip swap rate, also known as contado con liqui or CCL, is obtained by investors buying shares or bonds in pesos and selling them in dollars on the international market. The “CCL dollar” is the implicit exchange rate in that operation. The “MEP dollar” is the same as CCL but in the local market.
The modifications follow two previous modifications by the CNV earlier this month that also affected access to financial dollars. On May 1, a resolution in the official bulletin established that those who have short-term loans in force would not be able to access financial dollars, and that some shareholders, managers, and employees of financial brokers may not buy and sell bonds in the financial market in which the Central Bank intervenes by buying and selling bonds to control the value of financial dollars.
In April, the CNV also extended mandatory parking for Argentine sovereign bonds under foreign law to three days.
“Operations with blue chip swap rate shrank down significantly,” Pablo Repetto, Head of Research of the broker Aurum Valores, told the Herald. “But [the measure] didn’t seem to have affected MEP dollar operations.”
“Some US$42 million have been traded so far today with MEP in the AL and GD markets, which is a relatively normal volume for a day.”
Analysis
A financial analyst who asked to remain anonymous said:
“If the price of dollars that you obtain with AL and GD [bonds] is perceived to be relatively cheap, without the arbitrage, you could encourage more demand for the cheapest dollar, which is the one the government is trying to control. In that context, the fact that you can’t arbitrate between the markets could be counterproductive to the goals of not losing the scarce international reserves and keeping exchange rates at bay.
“Each imposed restriction is a bad idea in itself. It makes [the government] come up with new restrictions going forward. The administration of scarcity is prevailing over the true sense of the capital market.”
Facundo Iglesia contributed reporting
